Update on Requirement for Hospitals to Contract with Public Option Plans

April 7, 2022

New Law and Proposed Rules: Hospital Action Required


To: Rural Hospital Chief Executive Officers, Chief Financial Officers, Legal Counsel, and Government Affairs Staff

Please share this bulletin with your hospital payor contracting staff

Staff Contact: Andrew Busz, FAHM, Policy Director, Government Affairs  andrewb@wsha.org | (206) 216-2533
Subject: Update on Requirement for Hospitals to Contract with Public Option Plans


This bulletin provides information for hospital contracting staff to consider as they identify and respond to offers from carriers for public option plans.  It also reminds hospitals about a law enacted during the 2021 Washington State legislative session, which requires hospitals to contract with at least one public option plan for the 2023 plan year.

The public option law applies to all acute care hospitals licensed under chapter 70.41 RCW.

Hospital legal, government affairs, financial, and payor contracting staff should review this bulletin,  Senate Bill 5377, and the proposed rules to understand the new requirements and ensure compliance. The proposed rules give the Health Care Authority broad investigatory authority and ability to impose significant fines for noncompliance. Since contracting for 2023 is underway, we recommend hospitals review their contracting process and communications with carriers offering public option plans to ensure the hospital can document compliance.

We recommend that hospitals be mindful of the public option contracting requirements in contracting decisions and communications involving carriers that are offering public option plans. WSHA further recommends careful review to ensure that a hospital is contracted with a least one plan upon receipt of a valid offer to contract in order to be compliant with the contracting requirement.

Senate Bill 5377, enacted during the 2021 legislative session, included a provision mandating acute care hospital participation in at least one public option plan upon receiving an offer to contract. This provision takes effect in 2022 or any subsequent year when there are any counties where a public option health plan is not available to consumers. Because there were 14 counties without public option health plans for 2022, the mandatory participation provision will be in effect for plan year 2023 with contracting arrangements occurring in 2022.

Rulemaking for the enforcement and sanctions provisions of SB 5377 is underway. WSHA submitted comments on the stakeholder draft rule and submitted comments and testified on the CR-102 version of the proposed rule. WSHA expressed our concerns that that the proposed rules exceed HCA’s statutory authority, but it is unclear if there will be any significant changes to the proposed rule.

Contracting and Documentation Considerations
We recommend hospitals consider the following information as they consider offers from carriers for public option plans, based on our understanding of the program and the proposed rule in its current form.

  • Hospitals are operating with a lack of information: It is unknown how many or which carriers will pursue contracting hospitals and providers and with HCA for public option for 2023, or what service areas they will pursue. Carriers will not need to file network information with the Health Care Authority until May.  A hospital may receive multiple offers to contract, a single offer, or none.
  • Carefully consider how to identify a “valid offer to contract”: Under the proposed rule, “Valid offer to contract” means:
    • A written offer made by a carrier to a hospital to enter a contract with the carrier to provide in-network coverage to enrollees of the carrier’s public option plans; and
    • The carrier’s offer must contain sufficient information so that a reasonable person would understand that a good faith offer has been made. The carrier must, at a minimum, include the reimbursement rate offered in a manner that constitutes a legally binding document that the parties could execute.

We believe this definition could apply to a broad range of communications, offers and proposals, including letters of intent and memoranda of understanding, as well as full agreements.  Under the proposed rule, HCA may initiate an investigation and request copies of these and other communications between the hospital and a public option plan to determine whether a valid offer was made.  We recommend hospital contracting staff consult with legal counsel if there is question as to whether a proposal meets the definition of “valid offer.”

  • Seek clarity regarding whether an offering qualifies as a public option plan: Public option plans will be generally referred to as “Cascade Care Select” plans, but they may be referred to in other ways by carriers. Health plans offered to individuals purchasing insurance on the exchange are generally referred to as “Cascade Care” – these terms can be confusing and used in different ways.

Hospitals should seek clarification from the carrier if it is unclear whether an offer from a carrier is for a public option plan. Senate Bill 5377 prohibits carriers and hospitals from conditioning negotiations or participation of a hospital for any health plan offered by the health carrier on the hospital’s negotiations or participation in a public option plan. If an offer from a carrier combines payment rates for public option and non-public option products, the hospital may consider requesting that the carrier separate the proposal into separate offers.  The requirement that a hospital contract with at least one plan upon receipt of a valid offer is limited to public option plans.

  • Consider documentation: The proposed rule allows HCA to conduct investigations in cases where a carrier reports a hospital declined their offer, which may include instances where a hospital is contracted with a public option plan and compliant with the law. HCA can also investigate if there are counties where no public option plan is available. We recommend hospital ensure they can access and provide documentation of their contracted status with at least one public option plan.
  • Payment limits apply to public option plans only: Public option plans must limit aggregate payment to 160 percent of the amount Medicare would have paid for the same set of services. This payment constraint is limited to public option (Cascade Care Select) and does not apply to other commercial or exchange products. This is a global reimbursement limit that will be monitored through actuarial analysis rather than a cap on payment rates to individual hospitals or providers. Public option plans have payment rate flexibility among providers so long as they conform to the aggregate limit.

Next Steps
Hospitals should consider the information in this bulletin and the stakeholder draft rule as they receive and consider offers from public options plans for the 2023 plan year.

Carriers will need to provide initial information to the Health Care Authority and Office of the Insurance Commissioner on their planned networks for public option by May, but the contracting process could extend later.  A general timeline of the procurement process is here.

WSHA will continue to engage in the HCA rulemaking process and will provide an update to member hospitals when rulemaking is finalized.

WSHA’s 2022 New Law Implementation Guide
Please visit WSHA’s new law implementation guide online. The Government Affairs team is hard at work preparing resources and information on the high priority bills that passed in 2022 to help members implement the new laws, as well as links to resources such as this bulletin. In addition, you will find the Government Affairs team’s schedule for release of upcoming resources on other laws and additional resources for implementation.

Background and References


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